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Yesterday, Judge Sweet found that there was sufficient evidence to survive summary judgment regarding allegations that Bear Stearns hid material information about its lack of liquidity and other problems during the financial crisis. He rejected the defendants’ argument that the supposedly hidden risks were “publicly known as a result of Bear Stearns’ disclosures”:

For example, both Plaintiff and Defendants point to a disclosure stating “inability to raise money in the long- term or short- term debt markets, or to engage in repurchase agreements or securities lending, could have a substantial negative effect on [Bear Stearns’ ] liquidity. ” Defendants frame this as sufficient disclosure to alert Plaintiff to risks, defeating the possibility of a misstatement or omission. Plaintiff emphasizes that Defendants disclosed only the possibility but not the certainty that Bear Stearns was already experiencing negative pressure as a result of its reliance on repo financing. . . .

“Nothing short of a complete failure of proof concerning an essential element of the nonmoving part y’s case will be sufficient to award summary judgment.” Celotex Corp . v . Catrett, 477 U.S. 317, 323 (1986). The disclosures Bear has identified are not so forthright and comprehensive that it can be said no dispute of material fact exists.

Judge Sweet rejected the plaintiff’s loss causation analysis based on a “leakage” theory (which looked to the spread of information over time rather than corrective disclosures alone). Defendants prevailed on their arguments that the plaintiff’s Section 18 claims were time-barred and that plaintiff’s holder claims (arguing that he had been defrauded into holding his shares, instead of selling them) were not viable.

Judge Sweet also addressed two expert reports, first finding that an SEC report on the collapse of Bear Stearns was admissible under Rule 803. Judge Sweet rejected the plaintiff’s loss causation report under Rule 702, finding that its “leakage” analysis lacked general acceptance and was not subject to peer review.